Transmissora Aliança de Energia Elétrica S.A. ($TAEE11)

Good morning, everyone, and thank you for joining Taesa's Q1 2026 Earnings Release Video Conference. [Operator Instructions] We would like to inform you that this video conference is being recorded and will be made available in the company's IR website where you'll also find the earnings release. [Operator Instructions] Please note that questions can be submitted during the presentation and will be read out loud by the IR Officer, Cristiano Grangeiro; and the IR coordinator, Juliana Castelli, and then answered by the executive officers during our Q&A session. We emphasize that the information contained in this presentation and any statements that may be made during the video conference regarding Taesa's business prospects, projections, and operational and financial targets are the beliefs and assumptions of the company's management and are information currently available. Forward-looking statements are not guarantees of performance since they involve risks, uncertainties, and assumptions since they refer to future events and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic and market conditions in addition to other operating factors may affect the future performance of Taesa and lead to results that materially differ from those expressed in such forward-looking statements. We now invite you to watch a video about the company. Then Juliana Castelli will present the company's Q1 earnings. [Presentation]

Good morning, everyone. I am Juliana Castelli, the Investor Relations Coordinator at Taesa. Welcome to Taesa's Q1 2026 Results Presentation. If you have any questions, you may submit them through the Q&A button on the platform during the presentation. We will also have a dedicated Q&A session with the management team at the end of the presentation. We hope you enjoyed the video conference. Starting on Slide 3, we present the values and purpose that guide our operations. We deliver energy efficiently and with quality, ensuring safety and trust in every relationship while contributing to the sustainable development of people and the planet. This purpose defines how we operate, make decisions, and position ourselves with our stakeholders. This strategic drive is supported by strong values that guide our organizational culture. Safety is our core value and always comes first. We act proactively and responsibly, prioritizing people's well-being and the reliability of our assets. We also build relationships based on trust, grounded in transparency, ethics, respect, strengthening long-term and consistent partnerships. Excellence drives our processes and results. We continuously pursue improvement, innovation, and high performance in everything we do. Lastly, and equally important, we generally care about people, fostering human development, well-being, and a safe and collaborative work environment. All this reflects the cultural transformation carried out over the last year, aimed at ensuring that our foundations are fully aligned with the future we are building together with our employees and you. As you can see, we have preserved our core identity while evolving in a moment that calls for change. On Slide 4, we reinforce our ongoing focus on efficiency across all areas of the business. This naturally includes financial efficiency. That said, we highlight the key aspects of the company's 21st debenture issuance, which was settled in March. The transaction totaled BRL 800 million and aim to strengthen our cash position and support working capital needs while maintaining discipline in capital structure management. It is important to point out that we will have significant expenses in May to amortize the first series of the fixed debenture issuance of the company. This issuance was transferred in 2 tranches of BRL 400 million, both indexed to CDI with competitive stress, extended maturities of 7 and 10 years, semiannual interest payments and among amortization starting in year 6 and 10, respectively. We have Bradesco as the sole book runner, delivering an efficient execution fully aligned with our financial strategy. In terms of pricing, we achieved the lowest spread among comparable recent issuances, once again, reinforcing market confidence in the company's credit quality and our ability to access funding efficiently. We decided to bring this transaction forward by 1 month to ensure the most efficient execution possible, and it proved to be a very good decision given the deterioration in the credit markets, wider spreads, and the private credit market conditions. Moving on to Slide 5, we highlight the key achievements of the quarter. Starting with Q1, we made solid progress across the financial, operational, and institutional fronts. On the financial side, as mentioned on the previous slide, we have successfully completed our 21st debenture issuance, strengthening our capital structure and expanding our debt maturity profile in line with our financial efficiency strategy and disciplined liability management. On the operational front, we advanced with the partial energization of the Tangara project in early March, adding about BRL 35.1 million in RAP, equivalent to about 33% of the project's total RAP related to the Santa Luzia III substation and the Acailandia-Miranda II transmission line sectioning. It's worth noting that Tangara is a highly relevant project for the company with an ANEEL reference investment of about BRL 1.1 billion, annual RAP of about BRL 108 million in the cycle and a regulatory deadline through March 2028. Still in early March, we delivered the ATE III reinforcement, adding about BRL 6.7 million in RAP to the company. Another important highlight in the quarter was our selective participation in ANEEL Transmission Auction #1 of 2026 held at the end of March. Once again, we maintain strict capital allocation discipline. Although we did not win the lot, we were closely monitoring, our participation was competitive and fully aligned with our operator profile as well as with our return and risk criteria in line with our business needs. On the ESG and transparency front, we published our 2025 sustainability report alongside our Q4 2025 results release, once again, bringing this disclosure forward. This initiative reinforces our commitment to transparency, predictability, and high-quality communication with investors and stakeholders while also highlighting the consistent evolution of our ESG agenda. We also maintained an active presence in strategic events throughout the period, strengthening the company's additional positioning. This included the seventh ANEFAC Women in Leadership meeting, the second women in energy hosted by CIGRE Brazil, and participation in the podcasting Temporada de Balancos that is hosted by Estadao's E-Investidor platform. Looking ahead to the beginning of this Q2, we continue to make progress in the execution of our greenfield projects with additional relevant milestones. We energized a new stage of Tangara, representing about 21% of project, adding about BRL 23 million in RAP and then bringing to completion about 54% of the project with delivery through roughly 23 months ahead of the regulatory deadline. We also advanced with the partial energization of Saira, a strategic project in the southern region of Brazil with interconnection with Argentina. In this phase, we completed the retrofit of the Garabi I converter, adding about BRL 23 million in RAP, accounting for about 12% of the project's total RAP. This early stage energization reinforced our execution capabilities, operational discipline, and commitment to value creation. Lastly, we highlight the Annual Shareholders Meeting that was held last week and which improved the company's results for the year in addition to dividend distribution in addition to other items. Moving on to Slide 6. We present the main highlights for the period. First, we highlight the evolution of EBITDA margins, reflecting the growth in regulatory net revenue driven by several project deliveries and energizations that positively impacted solution revenue as well as improvements in the variable portion in line with higher operational efficiency. As a result, regulatory EBITDA was up 10.3% in Q1, while EBITDA margin was up 0.5 percentage points on a consolidated basis and 0.6 percentage points on a proportional basis, reaching levels close to 85% and 88%, respectively. This performance once again reinforces the company's strong ability to convert revenue into operating results. It also reflects how we are increasing the margin. It also reflects well-controlled PMSO expenses with growth only slightly above inflation, even in a quarter marked by some specific cost pressures, particularly in personnel expenses. Another important highlight was the stronger operating cash generation, up 24% year-over-year, which continues to support the execution of our strategy while preserving financial balance throughout the investment cycle. In terms of investments, we deployed about BRL 312 million in the quarter, up 16% versus Q1 2025, reflecting progress across our project portfolio. On the financial side, as mentioned earlier, we successfully completed our 21st debenture issuance with a very efficient execution despite a still challenging credit environment. In terms of results, our regulatory net income totaled BRL 192.6 million in the quarter, maintaining a growth trajectory supported by operational expansion, efficiency gains and disciplined financial management. We also highlight the announcement of dividend distribution equivalent to 100% of regulatory net income, reinforcing our commitment to shareholder value creation. With that, we will move to the next slide to further detail each of these points. On Slide 7, we see our regulatory net income, which was up 10% in Q1 2026, totaling BRL 655.5 million. RAP increased significantly by about BRL 56 million, driven by tariff adjustments linked to IPCA and IGP-M as well as the contribution from Pitiguari and reinforcement from Novatrans, TSN and Sao Pedro, we entered into operation at the end of 2025. And in Q1 2026, we recorded a partial energization of Tangara and ATE. We also saw meaningful improvement in variable portion, and I will detail that. On Slide 8, we present the company's operational performance. In the quarter, our availability rate reached 99.95%, above the average of the past 10 years, reinforcing the consistency of our operations and optimization of our asset performance. The variable portion of RAP also showed a significant improvement compared to the prior year. This performance, on one hand, reflects a more pressured comparison base in Q1 2025 when we had higher impact events, particularly at Saira due to outages related to the retrofit implementation as well as ATE III as previously discussed. In practical terms, this means increasingly targeted actions, reducing the need for outages, mitigating operational risks, and allocating maintenance CapEx more efficiently with a focus on previously identified critical assets. These initiatives reinforce our ongoing operational efficiency with direct impacts on risk and cost reduction as well as great effectiveness in asset management and operations. On Slide 9, we see the evolution of regulatory EBITDA, which continues to show consistent growth. As you can see, regulatory EBITDA totaled BRL 562.1 million in Q1 2026, up 10.3% quarter-over-quarter. This performance was mainly driven by 3 factors. First, RAP growth with an increase of nearly BRL 56 million. Second, the improvement in the variable portion, reflecting the operational performance. And the third, OpEx was up 5.8%, slightly above inflation for the period, mainly explained by higher personnel costs, particularly due to profit sharing payments in Q1 2026 and the effect of the annual collective bargaining agreement. Even with this temporary cost pressure, we were able to capture margin expansion. EBITDA margin reached 85.8% in the quarter, improving versus Q1 2025. On a proportional basis, including affiliates, this margin approaches a very strong level of nearly 88%. Overall, this result once again reinforces the company is continually growing. On Slide 10, we see that regulatory net income totaled BRL 192.6 million in Q1 2026, up 2.3% versus Q1 2025. In addition to the effects already discussed, it's worth highlighting the main impacts across the remaining lines. Equity income dropped in the quarter, mainly reflecting the impact of initial demand for issuances of Aimores and Paraguacu in addition to issuances at TBE, which affect the results of our affiliates. We also recorded higher depreciation and amortization expenses, primarily driven by projects entered into operation and asset unitization process. Net financial expenses were up by BRL 35.9 million year-over-year, reflecting more efficient cash management and lower monetary variation in the period even in a still challenging macroeconomic environment with higher net debt. Income and social contribution expenses showed a negative variation in the quarter, mainly due to one-off adjustments that had benefited Q1 2024 as well as the tax regime changed at Sao Pedro due to the actual profit method. Despite some pressures affecting the comparison, we delivered regulatory earnings. Very impressive. Moving on to Slide 11, we present IFRS net income. It's important to note that this is an accounting measure and, therefore, does not directly reflect cash generation. It is based on the concession contract asset in accordance with CPC 47 accounting standards. Regulatory net income, on the other hand, is more closely aligned with cash generation and as I mentioned earlier, showed solid growth in the quarter-over-quarter and year-over-year. IFRS net income was down 3.2%, totaling BRL 353.6 million. Some of the effects discussed in the regulatory results, such as the changes in variable portion of financial expenses also impacted IFRS net income. However, the main drivers were BRL 140 million drop in inflation adjustment revenue from the concession assets, mainly due to the contraction of IGP-M, which recorded minus 0.33% in Q1 2026 versus 2.29% in Q1 2025. It's worth noting that this index is applying with a 1-month lag. A BRL 60 million drop in equity income impacted by the contraction of IGP-M, which also negatively affected inflation adjustment revenue of affiliates as well as interest expenses from finances at Aimores, Paraguacu, and TBE. On the positive side, our infrastructure implementation margin was up BRL 123 million, mainly driven by higher investments in Ananai, Tangara, and the second phase of Saira in line with the progress that we will detail later as well as reinforcement at ATE and Sao Pedro. And then we had higher net financial expenses of about BRL 36 million, also explaining regulatory results. On Slide 12, we present the progress of our projects under construction. As mentioned earlier, we delivered milestones this year for the Tangara and Saira project as well as the ATE III reinforcement. As shown on the right side, our major greenfield projects are approaching final delivery with some already partially operational. Saira, for example, has reached about 86% of total RAP following the delivery of Garabi I converter in April. Tangara and [indiscernible] has more than half of its total RAP already enabled with the latest delivery. Ananai, our largest stand-alone greenfield project currently under construction continues to progress well. Jurua, an important substation project with live section in the state of Sao Paulo is also advancing in line with the schedule. This progress is naturally reflected in the CapEx deployed during the period with a relevant portion of this year's planned CapEx already executed. It's worth recalling that we updated our expected CapEx curve for the upcoming years to incorporate recent authorizations related to enforcement. As a reminder, this CapEx curve reflects our current best estimate for contracted projects and does not include new projects and may, therefore, be subject to future revisions. On the reinforcement front, we added ATE III to the growing list of delivery projects, 5 reinforcements recently in for concessions. We also highlighted those currently under execution, including Sao Pedro, ATE, and EATE, and ENTE as well as the reinforcement and improvements authorized under the POTEE program at the end of 2025, totaling about BRL 542 million in CapEx to be deployed over the next 3 years. On Slide 13, we present the company's current indebtedness profile. The chart on the left shows the evolution of net debt and our leverage level measured by net debt to regulatory EBITDA on a proportional consolidation basis. At the end of Q1 2026, our total net debt was BRL 12.8 billion, considering all our participation, all our shareholdings with leverage at 4.2x, slightly above the previous quarter, in line with our expectations, particularly due to the progress of projects under construction and the planned investment schedule. The average real cost of debt stood at 5.75%, mainly reflecting higher CDI levels during the period. The average maturity closed the quarter at 5.4 years, higher than a year ago, reflecting our liability extension strategy supported primarily by the 20th and 21st debenture issuances with tenures of 15 and 7 to 10 years, respectively. In terms of debt profile, we maintain a structure well aligned with the characteristics of the business with 50% of debt index to IPCA, 41% to CDI, and 2% to IGP-M. Lastly, it is worth highlighting that the company's corporate credit rating on national scale assigned by Moody's and Fitch remains at the highest level, AAA. Moving on to Slide 14. Before we conclude the presentation, yesterday, we announced a dividend distribution based on the quarter's regulatory results. The Board of Directors approved the distribution of BRL 192.6 million in interest and equity with a record date of May 11. This corresponds to BRL 0.66 per unit, including other dividends declared and paid in 2025. Total distributions to date amount to BRL 2.40 per unit or BRL 829 million. It is worth noting that BRL 313 million was approved last week at the shareholders' meeting with payment scheduled for the end of May, in 3 weeks. With that, we conclude our presentation. We will now open the floor for the Q&A session. Thank you, everyone.

Good morning, everyone. Thank you for joining our Q1 2026 earnings call. I first would like to present everyone who's here. We have Rinaldo Pecchio, our CEO; Catia Pereira, our Chief of IR; we have Jell Andrade, our Implementation Officer; Juliana Castelli, our IR coordinator. So I'll turn it over to Juliana to start the questions.

Hello, everyone. We have a question here from an individual investor, from [ Pedro ]. I will ask Rinaldo Pecchio this question. He asks, the company has participated 1 lot of the last auction in market was not successful. What is your take on the result of the auction and what is your strategy?

Thank you, Juliana. Good question. An auction is a moment when the company submits to a bidding process based on the assessment it makes and the offer it puts forward. So when we bid, we bid according to our financial discipline strategy. It has to be according to what we have planned. So yes, we have participated. We have done -- we have bidded, but we did not win. And when that happens, we end up discussing what went well or not, maybe what our competitor saw and we did not. It may be related to cost of capital, opportunity, looking at assets in different time lines. So there are different aspects to be considered. On our end, the study that was assessed was a really good study. We do believe that our bidding was at the limit to create value for our shareholders. If we did not win, we are, of course, trying to learn to see what others did to win. But in this case, I can say that our bidding proposal was really good, considering the technology that had to be implemented, deadlines. So we consider each and every aspect. And this is always going to be the way that Taesa is going to work in these auctions. We will study, we'll assess the entire situations, but always considering financial discipline and return to shareholders. It is frustrating not to have one. But on the other hand, it wasn't worth it for us once we had established a threshold. For the other auctions, we will do what we've done. So we'll have an analysis. We will participate of other auctions and winning and losing has to do also with other player strategies.

I have a question here from [ Renaldo Varesima ] an individual investor. He says that considering the possibility of a larger period with higher Selic, wouldn't it be better to reduce dividend distribution to instead of reducing leverage levels?

Thank you for the question. Well, just to explain what we've been doing according to our planning, we had already a higher Selic rate. Of course, that with the market situation, it will continue a bit higher than expected. But we plan ourselves, we have our budget, and we are founded -- the foundation is our financial discipline. What we did in 2025, and we continue doing in 2026 is that we have a contracted deleveraging. So we saw an increase in the leverage levels due to the investment cycle. This cycle is coming to an end. Most of the deliveries of the largest projects are going to be completed here in the first half of the year. So the leverage level should be below 4. The plan we have outlined and what we have been doing in terms of dividend distribution is aligned with our financial capacity with our financial strength. In addition, we increased by 24% our cash generation. So yes, we are gaining efficiency, but we are also with a more positive cash flow. So we will continuously monitoring the market to keep a close eye on the levels of return based on the Selic interest rate. But it is according to what we had planned.

Thank you, Catia. We do have a few questions regarding operational performance and improve in our variable portion. So I will ask Luis, our Technical Chief Implementation Officer. Luis, would you mention if this is a long-term effect and what it is attributed to that?

This is a good question. First of all, we need to understand the dimensions we are discussing. Taesa is present in 18 states. So 15,000 kilometers of lines plus many, many substations. So we have logistics and infrastructure to really distribute energy according to the variable portion we have today. To sum up, we have 6 regional offices, 10 coordination teams. And then we have different implementation teams that allow our logistics to be strategically located for a better energy distribution and transmission. We also revised all our maintenance procedures, focusing on a predictive and corrective maintenance and monitoring. That said, we also have an emergency plan that supports our operations so that we are ready to face any and all situations for us to continue with availability rates as high as it is possible and the variable portion also. So we use technology focused on predictive and preventive maintenance, logistics that is ready for any and all types of events. We always say that we are located across Brazil. So we may suffer with weather conditions, and we need to be fully prepared from a technical standpoint to be ready to serve the community from a logistical standpoint. So the goal is to keep the best availability indexes and the lowest variable portion index and be ready to really support our operations to reduce potential impacts whenever we are faced with adverse events.

Excellent, Luis. To add to that, while we are at it, [ Dimar Carlos ] does Taesa intend to invest in solar and wind power? What is -- what are the plans of Taesa for the future?

Well, thank you so much for this question. I think it's really important to understand the segment line of business. When we say that Taesa is a transmitter, when we talk about transmission, our main responsibility is to maintain the availability of the asset. We do not control the energy that is transported by our assets. When we talk about solar power, this is generation in the generation segment. So we are a transmission company in the transmission segment. We don't intend, according to our strategic planning, to engage in the energy market. Our goal is to have specialized technical teams and operational teams so that we can increasingly offer the best support to our lines and substations. So no, we don't intend to engage into the solar and wind power. Nevertheless, we are always focused on innovation. Innovation is a key pillar of the company. This is a driving force of our operations. We have used over the last years innovation as a pillar to continuously improve our indicators. For example, use of drones, monitoring, having cameras on the monitoring and with automatic diagnosis in addition to other innovations that support our operations and help with preventive and predictive maintenance so that we can keep our availability indexes and variable portions according to our plan. So yes, innovation is a core pillar that will continue to support our operation and the company's strategy overall.

Thank you, Lius. We have a few questions from Ricardo Bello, sell-side of Safra. He has 2 questions. The first, I will ask Jell. So he asks, what is your take on the discussions on the regulation of the battery market?

With regard to batteries, this is a technology that will probably be implemented. We do have some systemic regulations in Brazil. Taesa is keeping a close eye in the evolution involving the use of this technology. Also from a regulation standpoint, we do understand that, yes, we've seen some progress. There are still some discussions in place. There is no definition yet. There are issues to be addressed, but we are keeping a close eye on these discussions. From a technology standpoint, we are preparing to implement the best solutions available in the market that could benefit system and Taesa as a result.

Thank you, Jell. Ricardo also asked, and I will ask Catia that, about taxes. Should we expect a more normalized level for this year and so on, even with dividend distribution?

What we expect when we look to the results of the Q1, we expect a more effective tax level with some variation when we think about interest on equity when we should have the second half of the year, but much more related to the actual rate, much more than what we were seeing in 2025.

I think the next question here is related to the regulatory -- regulation agenda. So I'll try to sum up to see if I can summarize that. So first of all, we have some concessions that are expiring and how are we considering that in terms of results and the regulatory risks of the transmission agenda.

Thank you for the question. With regards to regulatory risks, there is something that is quite important to be considered. This is an evolution that is regarding indemnification in the end of the concession. So there is a discussion regarding the regulatory road map. So Taesa, together with other companies and other players has been discussing with the regulatory body to understand concession indemnification. It has to be preserved and kept within the perspective of when the investment was made. For example, if we look into what happened over the last quarters, what we can expect is that this is a topic in the regulatory agenda. We have tried to work together with other players and body authorities. And I think that now we should see some evolution due to the deadline we have in place. So if we have concessions expiring that we need to have concession indemnification or any kind of compensation or a renovation of the concession. So we are actively engaged in the discussions. And whenever we can, we are going to announce to the market where we can. There is nothing official. There is no final definition of how things are going to play out. But yes, we are actively engaged in the discussions and evaluating the possible scenarios, and we should see some news regarding that over the next quarters. With regards to the company, we've been gearing efforts to continue growing. If we look into the investments made, we have added over BRL 1 billion in revenue. So we have geared efforts to increase revenues and produce great results. And we will continue paying attention to any and all opportunities that could benefit the company, opportunities in auctions or in M&A transactions to help the company continue growing according to really what we've done over the last years. But again, profitability is always going to be key. We can say that we want to continue growing, but this growth has to really be in line with our profitability background and our profitability record. We are a company that is well known by its efficient project management and also by our financial discipline that allows us to continue distributing dividends like we have.

Thank you, Pecchio. Then we have [ Pio Arizo ] that is an individual investor. What about the use of AI? Has the company implemented AI tools? Can you comment, Catia?

Yes. Well, AI is really a trending topic. There's so much information on the market. Luis, I think he talked about that when we talk about efficiency and the territory recover, we need AI. AI is embedded in the censoring systems we have in the prevention and data analysis that we have. Last year, we launched TAESA Ventures posing some challenges to the market. And talking to our operational and technical fronts, we see great opportunities. So we want to know what start-ups can accelerate. So we've been working together with them, but it's not limited to the technical or extension of fronts, but how can we use AI to be more competitive in mapping auctions and also to look into how we can improve our operations. We had our pitch day, and we want agents to help us on our everyday operations. So today, we see AI in technical areas, extension areas, support teams and back office teams. And again, there is still a lot to be done, especially when we talk about data governance and how we can have insights based on this data collection. When we look into the censoring data and how much information we have, it's really interesting to see how many insights can be produced, not only with regards to preventive maintenance, but also with regards to actions that will give us the edge.

Thank you, Catia. I think we have addressed all the questions here. We received many questions. Thank you so much for submitting your questions. We had a great audience. Thank you so much for investors and analysts. Since we don't have any more questions, I'll turn over to Pecchio for his final remarks.

Thank you, Cristiano. It's always good to have an opportunity to be talking to the market, to be receiving the questions you may have for you to know a bit more about what the company is doing, about what the different teams are doing. I think the company has been quite consistent, has been producing positive results. So I'd like to thank each and all of employees. We're here representing over 900 employees that work with us. We have third parties that are also contractors in our projects. So we are very positive at the end of this quarter. We have an important regulatory agenda ahead that is quite important. We have strategic planning also focused on gaining efficiency like you can see on our results and also introducing innovation on our operations. I always like to say that I'm optimistic regarding what's to come when we look into the future. And I think that we will always be transparent in sharing the results with you from the company's standpoint. We have also our IR channels that are at your disposal. If you have any other questions, you can just reach out to our team. Thank you so much, and we hope to see you soon and share great news next quarter. [Statements in English on this transcript were spoken by an interpreter present on the live call.]